# Paul Krugman on Trump’s Trade War

An episode of [Paul Krugman Podcast](https://invisiblenetwork.ai/podcast/1877144831), 16 May 2025, 44 min.

Audio: https://api.substack.com/feed/podcast/163733533/2f8a2110fa7e646fc8fb250ed676e923.mp3

Thank you Dan Gardner, Peter Kalmus, David Richard Holmquist, Marianne O, CFA, Rajan Menon, and many others for tuning into my live video with Ryan Lizza! Join me for my next live video in the app. Ryan’ internet went down partway through, so this is Part I. Part II follows. Get full access to Paul Krugman at paulkrugman.substack.com/subscribe

## Transcript

[0:00] SPEAKER_00: everyone.
[0:00] SPEAKER_00: It's Ryan Lizzo with Telus News.
[0:02] SPEAKER_00: And with me today,
[0:03] SPEAKER_00: someone who needs no introduction is Paul Krugman,
[0:08] SPEAKER_00: where you can you can find him now at Paul Krugman dot Substack dot com.
[0:12] He's been probably one of the most successful Substack launches
[0:17] of when did you
[0:18] SPEAKER_00: start,
[0:18] SPEAKER_00: Paul,
[0:18] SPEAKER_00: this year or did you start late last year?
[0:20] SPEAKER_01: Well, it's complicated.
[0:21] SPEAKER_01: I started late last year.
[0:23] SPEAKER_01: I had an account that was dormant for a few years.
[0:28] SPEAKER_01: I opened one and
[0:30] times went ballistic and so i stopped using it until i left the
[0:33] times but now uh
[0:35] yeah since december since december yeah well you have been a
[0:39] source of sanity and
[0:41] and clarity um and lucky for us um tariffs have an issue that
[0:48] uh you did a lot of
[0:49] your your earliest work on has become uh you know central to
[0:54] the conversation and
[0:55] SPEAKER_00: so
[0:56] I want to just do this as a kind of masterclass on tariffs and
[1:01] what we've witnessed
[1:02] SPEAKER_00: so far and what we need to worry about going forward,
[1:06] SPEAKER_00: Paul.
[1:07] SPEAKER_00: So if we can, just let's start with the context of
[1:13] one needs to understand or one needs to have to understand the
[1:18] early days of
[1:19] SPEAKER_00: Trump's tariffs proposal.
[1:21] SPEAKER_00: The world as it was,
[1:23] SPEAKER_00: you know,
[1:24] SPEAKER_00: pre-Trump when it comes to tariffs,
[1:27] which just have not been this major tool in recent presidents'
[1:31] economic arsenal.
[1:33] SPEAKER_00: Yeah.
[1:34] SPEAKER_01: So there's an
[1:36] SPEAKER_01: There's a system, or there was a system.
[1:39] SPEAKER_01: I mean,
[1:41] international trade is one of those areas where international
[1:45] cooperation actually
[1:47] SPEAKER_01: works or used to work,
[1:48] where we really built a system of rules and is by the standards
[1:56] of almost any other
[1:57] SPEAKER_01: government policy very clean.
[2:00] SPEAKER_01: So it really goes back
[2:03] SPEAKER_01: more than 90 years.
[2:04] SPEAKER_01: The U.S.
[2:05] SPEAKER_01: used to have lots of tariffs,
[2:07] SPEAKER_01: and the tariffs were—every time the tariff bill,
[2:11] SPEAKER_01: it was a Christmas tree.
[2:12] SPEAKER_01: It would go through Congress,
[2:13] SPEAKER_01: and every—you know,
[2:14] Congressman Baumfog from Indiana would insist that the
[2:19] clothespin factory in his
[2:21] SPEAKER_01: district got a special tariff,
[2:23] SPEAKER_01: and it was—the log rolling,
[2:25] SPEAKER_01: the bribery was just enormous.
[2:28] SPEAKER_01: And in 1930, we got one of the worst.
[2:30] SPEAKER_01: We got the Smoot-Hawley Tariff,
[2:32] SPEAKER_01: which at the time seemed like a horrible,
[2:36] SPEAKER_01: disgraceful and destructive thing.
[2:38] SPEAKER_01: It probably didn't go into the Great Depression,
[2:41] SPEAKER_01: although people often say that it did,
[2:42] SPEAKER_01: but it was definitely not helpful.
[2:45] SPEAKER_01: And FDR said it's bad for the economy.
[2:51] SPEAKER_01: It's bad for America and the world.
[2:54] SPEAKER_01: We need to have
[2:56] SPEAKER_01: agreements with countries,
[2:57] SPEAKER_01: we need to bring down these crazy tariffs,
[3:00] really high taxes on imports that are largely just about
[3:04] rewarding special interest
[3:06] SPEAKER_01: groups.
[3:07] SPEAKER_01: And so a very clever system,
[3:09] SPEAKER_01: the typical Trade Agreements Act of 1934,
[3:13] SPEAKER_01: which said,
[3:14] SPEAKER_01: okay,
[3:15] we understand that just yelling at people that economic theory
[3:18] says free trade is
[3:19] SPEAKER_01: good doesn't work.
[3:22] SPEAKER_01: But if we sign agreements with countries that say,
[3:26] SPEAKER_01: we'll cut our tariffs if you cut your tariffs,
[3:28] SPEAKER_01: then you bring countervailing interests,
[3:31] SPEAKER_01: special interest groups on our side,
[3:34] SPEAKER_01: exporters,
[3:35] SPEAKER_01: the picture.
[3:36] SPEAKER_01: And so although kind of mercantilist in...
[3:40] SPEAKER_01: you know,
[3:41] SPEAKER_01: reducing a tariff is a concession,
[3:43] SPEAKER_01: even if it's good for America,
[3:46] SPEAKER_01: it created a sort of rational system.
[3:49] SPEAKER_01: And first, we had a bunch of bilateral agreements.
[3:51] SPEAKER_01: And in 1947,
[3:54] SPEAKER_01: there was the General Agreement on Tariffs and Trade,
[3:57] SPEAKER_01: which involved a lot of countries,
[3:59] SPEAKER_01: which was a system that America built in its image.
[4:03] SPEAKER_01: And ever since then, up until 2016,
[4:06] SPEAKER_01: We had a series of negotiations,
[4:09] SPEAKER_01: deals,
[4:10] SPEAKER_01: that steadily brought tariffs down,
[4:14] brought things – the economy became – we didn't go all the way
[4:19] to free trade,
[4:20] SPEAKER_01: but we got tariffs – our tariffs down to under 3% on average.
[4:25] SPEAKER_01: So did most of our trading partners.
[4:28] SPEAKER_01: It was a –
[4:30] SPEAKER_01: I would teach it in my classes.
[4:31] This is a story of how international cooperation,
[4:34] negotiation,
[4:36] and political realism can work.
[4:38] SPEAKER_01: And then along came it all up.
[4:43] SPEAKER_00: So,
[4:44] SPEAKER_00: I mean,
[4:44] what's so interesting about this history and important to
[4:47] understand what happened
[4:49] SPEAKER_00: in the last few months is that
[4:52] SPEAKER_00: Between the 1934 law and the 1940s and GATT in 1947 and the rounds,
[4:58] SPEAKER_00: you know,
[4:58] SPEAKER_00: the next 50 years of rounds of reducing tariffs,
[5:01] SPEAKER_00: by the time Trump comes along,
[5:05] SPEAKER_00: tariffs are where?
[5:06] SPEAKER_00: Tariffs are extremely low because of this entire history.
[5:10] SPEAKER_00: That's right.
[5:12] SPEAKER_01: Most things enter the United States.
[5:15] SPEAKER_01: with very, very low tariffs.
[5:16] SPEAKER_01: There's a couple of things.
[5:19] SPEAKER_01: If we want to get into it, there's some funny story.
[5:21] SPEAKER_01: We had a tariff on light trucks.
[5:24] SPEAKER_01: We had one before, which is a weird history that involves chickens.
[5:32] SPEAKER_01: But overall, very little.
[5:34] SPEAKER_01: And Trump always talks about reciprocity, but we had reciprocity.
[5:39] SPEAKER_01: The fact of the matter is that Trump
[5:45] SPEAKER_01: negotiates a deal with Britain,
[5:46] but actually there's very little substance to it because there
[5:51] was nothing to
[5:52] SPEAKER_01: negotiate.
[5:53] SPEAKER_01: Britain leveraged a tariff on U.S.
[5:55] SPEAKER_01: manufactured goods of less than 1%.
[5:57] SPEAKER_01: So does the European Union.
[5:59] SPEAKER_01: We basically already have reciprocal low tariffs,
[6:04] SPEAKER_01: and now the country that stands out like a sore thumb is America.
[6:08] SPEAKER_00: And just to back up a little bit,
[6:09] SPEAKER_00: because we did cover this,
[6:13] SPEAKER_00: what's the basic economic case of why tariffs are bad,
[6:18] SPEAKER_00: were bad,
[6:19] SPEAKER_00: that led to the 1934 law that led to GATT?
[6:23] What's just the sort of simplest explanation for why free
[6:29] traders want them to be lower?
[6:32] Well,
[6:32] actually,
[6:32] there's a famous old economics essay about the parable of the
[6:38] fabulous factory.
[6:40] SPEAKER_01: Somebody has a magical, you know, secret technology.
[6:43] SPEAKER_01: There's a factory on the coast where he takes...
[6:47] SPEAKER_01: stuff that we're really good at producing,
[6:49] SPEAKER_01: soybeans,
[6:51] SPEAKER_01: advanced electronics,
[6:53] SPEAKER_01: takes it into the factory and out of the factory,
[6:56] SPEAKER_01: processed from this come stuff that people really want,
[7:01] SPEAKER_01: consumer electronics,
[7:02] SPEAKER_01: cars,
[7:04] SPEAKER_01: you know,
[7:04] SPEAKER_01: great stuff.
[7:05] SPEAKER_01: And everybody is celebrating.
[7:06] SPEAKER_01: He's on the cover of Time magazine as the great industrialist.
[7:10] SPEAKER_01: And then somebody discovers, actually, he's faking it.
[7:13] SPEAKER_01: There's no factory.
[7:14] SPEAKER_01: It's actually a port.
[7:15] SPEAKER_01: And he's actually bringing in
[7:17] He's actually shipping stuff out to foreign countries and
[7:19] bringing stuff in from
[7:20] SPEAKER_01: foreign countries.
[7:21] SPEAKER_01: Trade is a way to produce stuff.
[7:23] It's a way to take stuff that you're pretty good at doing and
[7:28] send it to other
[7:28] SPEAKER_01: countries and bring back stuff that you're not as good at doing.
[7:32] SPEAKER_01: It makes you richer.
[7:33] SPEAKER_01: Now, there are, as with any technology, there may be loot.
[7:38] SPEAKER_01: people who are hurt,
[7:39] but it's really no different from any other kind of productive
[7:45] transformation of
[7:46] SPEAKER_01: stuff,
[7:47] SPEAKER_01: except that it involves stuff crossing borders.
[7:51] SPEAKER_00: And so,
[7:51] SPEAKER_00: all right,
[7:52] so Trump comes along and he has this sort of inexplicable
[7:58] hostility to trade
[8:01] SPEAKER_00: imbalances,
[8:02] SPEAKER_00: trade deficits,
[8:03] SPEAKER_00: this obsession with tariffs.
[8:08] You wrote something recently that I thought was really good
[8:11] because even to people
[8:13] SPEAKER_00: who have some basic economic understanding,
[8:15] SPEAKER_00: when they hear the word deficit,
[8:17] SPEAKER_00: they think bad,
[8:18] SPEAKER_00: right?
[8:18] SPEAKER_00: Sure.
[8:19] And when they hear that country X has any sort of tariff
[8:22] against one of our
[8:24] SPEAKER_00: products,
[8:25] SPEAKER_00: it's easier for us as a politician to make the argument that that's bad.
[8:28] SPEAKER_00: I'm going to fix that.
[8:30] And so as you wrote,
[8:32] there's a sort of gut appeal to Trump's crude mercantilism.
[8:37] Could you just unpack that a little bit for us of sort of what
[8:41] is mercantilism and
[8:43] SPEAKER_00: why is it politically difficult to sort of make the case against it?
[8:47] SPEAKER_01: Yeah,
[8:47] SPEAKER_01: I mean,
[8:47] mercantilism originally was the idea that you wanted to run a
[8:51] trade surplus so that
[8:52] SPEAKER_01: you could accumulate gold and silver,
[8:54] SPEAKER_01: and that would make your country rich and able to pay for wars and stuff.
[8:58] SPEAKER_01: And obviously,
[8:59] SPEAKER_01: I was going to say,
[9:00] SPEAKER_01: obviously nobody believes that,
[9:01] SPEAKER_01: though God knows what people believe at this point.
[9:04] SPEAKER_01: Look, we live in a society, an economy where...
[9:13] SPEAKER_01: buying things is usually not a problem and selling things sometimes is.
[9:16] SPEAKER_01: So you always want,
[9:17] SPEAKER_01: you know,
[9:18] if you've managed to close a deal and make it profitable and
[9:23] it's natural to kind
[9:25] SPEAKER_01: of make that,
[9:26] that particular analogy to think that if you get somebody to
[9:29] buy your stuff that
[9:32] SPEAKER_01: you've won,
[9:32] SPEAKER_01: and if you buy their stuff that you've lost,
[9:36] SPEAKER_01: that's a,
[9:37] SPEAKER_01: everybody,
[9:38] SPEAKER_01: you know,
[9:40] sort of instinctively feels that and it's it just happens to be
[9:43] a really bad
[9:44] analogy um but i think that's the way it comes across i mean
[9:48] there's there i've
[9:49] seen you know if i buy um if i buy a a pair of shoes made
[9:56] overseas then uh i have
[9:58] SPEAKER_01: the shoes but they have my money and if i buy
[10:01] SPEAKER_01: In America, I still have the shoes, but Americans have the money.
[10:05] SPEAKER_01: That sounds falsely attributed to Abraham Lincoln.
[10:08] SPEAKER_01: Lots of stuff.
[10:10] SPEAKER_01: Hard to say something like that.
[10:12] SPEAKER_01: Because it's actually not true.
[10:15] SPEAKER_01: The fact of the matter is, if you try to
[10:20] SPEAKER_01: If you try to make stuff for yourself,
[10:21] usually it's a bad idea if it's to work to buy it abroad
[10:26] because you could be doing
[10:27] SPEAKER_01: something else.
[10:28] So the Commerce Secretary wants millions of workers screwing in
[10:33] millions of tiny
[10:33] SPEAKER_01: little screws into iPhones.
[10:36] SPEAKER_01: This is not a good use of Americans' time.
[10:40] Let's just dwell on that point a little bit to distinguish
[10:42] between – you wrote
[10:44] SPEAKER_00: recently,
[10:44] and I think people get hung up on the sort of new fad – I don't
[10:50] want to call it a
[10:50] fad because that sounds pejorative – but industrial policy has
[10:53] made a comeback in
[10:56] SPEAKER_00: the Democratic Party.
[10:59] SPEAKER_00: You wrote recently,
[11:00] SPEAKER_00: I,
[11:01] SPEAKER_00: like many economists,
[11:02] SPEAKER_00: have come around to the view that we should engage in a limited amount of
[11:04] industrial policy using subsidies and other tools to promote
[11:08] some industries of the
[11:09] SPEAKER_00: future,
[11:10] SPEAKER_00: especially those involving advanced technology.
[11:14] And you just made the point that there are certain things that
[11:16] we don't want to
[11:18] SPEAKER_00: bring back to the United States.
[11:20] SPEAKER_00: We don't necessarily want...
[11:22] SPEAKER_00: sweatshops making clothes.
[11:26] What's the balance between an industrial policy that makes
[11:32] sense and one that is
[11:35] SPEAKER_00: just batshit crazy?
[11:37] Because there are plenty of Democrats who are trying to figure
[11:42] out that balance.
[11:43] First of all,
[11:43] there's a big difference between an industrial policy and a
[11:46] tariff.
[11:47] SPEAKER_01: Industrial policy
[11:49] SPEAKER_01: you know, subsidizing, promoting an industry, but not taxing consumers.
[11:55] SPEAKER_01: The goal is to have the industry,
[11:57] SPEAKER_01: making it more expensive to consumers is not necessarily a good thing.
[12:03] SPEAKER_01: You know, it's a side, it's collateral damage, and why do that?
[12:09] You know,
[12:10] if you want an industry,
[12:12] if you want to subsidize an industry,
[12:13] subsidize the industry.
[12:16] SPEAKER_01: And there are a couple of reasons why you might want it.
[12:19] not just leave the industrial structure of your country up to
[12:23] the market.
[12:24] SPEAKER_01: One of them is technological spillover.
[12:29] It's pretty clear that there are industries that having them
[12:33] around helps other
[12:37] SPEAKER_01: industries,
[12:38] SPEAKER_01: helps other firms.
[12:40] SPEAKER_01: The fact that we have,
[12:42] SPEAKER_01: the fact that Silicon Valley exists,
[12:44] SPEAKER_01: says that there's some benefit to technology firms of having
[12:48] SPEAKER_01: other technology firms nearby.
[12:50] SPEAKER_01: And so certainly advanced technology, maybe some other things.
[12:55] SPEAKER_01: Um,
[12:57] SPEAKER_01: that's a valid reason for supporting some industries,
[13:01] SPEAKER_01: although it's tricky because if you look historically,
[13:05] SPEAKER_01: when people try to figure out what are the crucial industries,
[13:09] SPEAKER_01: um,
[13:09] SPEAKER_01: they've often been dead wrong.
[13:11] SPEAKER_01: Uh, I'm, I'm old enough.
[13:14] SPEAKER_01: Um,
[13:15] SPEAKER_01: to remember when memory chips were the thing,
[13:22] SPEAKER_01: who was going to control production memory chips,
[13:25] SPEAKER_01: was going to control the future.
[13:26] SPEAKER_01: And it's turned out,
[13:27] SPEAKER_01: actually,
[13:27] SPEAKER_01: that they are mass-produced and they're a commodity,
[13:32] SPEAKER_01: and it doesn't matter who produces the memory chips.
[13:35] SPEAKER_01: The higher-end logic chips,
[13:38] SPEAKER_01: yes,
[13:38] SPEAKER_01: in some cases,
[13:39] SPEAKER_01: it probably does matter,
[13:40] SPEAKER_01: but we don't...
[13:41] SPEAKER_01: And even back,
[13:43] SPEAKER_01: that's even before my time,
[13:44] SPEAKER_01: steel.
[13:45] have steel but the fact that it happens sometimes and
[13:50] particularly um that
[13:53] sometimes just as a precautionary thing probably want to have
[13:56] these industries and
[13:57] SPEAKER_01: then there's you know there's national security um the um
[14:02] SPEAKER_01: And that's even the GATT,
[14:04] SPEAKER_01: the General Agreement on Tariffs and Trade,
[14:06] SPEAKER_01: which is the set of rules that govern international trade,
[14:10] except for rogue nations like the United States that just say
[14:13] that and rip it up.
[14:16] SPEAKER_01: Article 22 of the GATT basically says...
[14:21] SPEAKER_01: If you honestly believe that your national security is on the line,
[14:24] SPEAKER_01: ignore everything else we said.
[14:25] SPEAKER_01: It's not written quite that way.
[14:28] And I would say that it's certainly having really critical
[14:36] advanced semiconductor
[14:37] SPEAKER_01: rare earths production here,
[14:40] SPEAKER_01: rather than depending on China,
[14:42] SPEAKER_01: makes sense.
[14:44] SPEAKER_01: In fact, even though Taiwan is...
[14:47] SPEAKER_01: kind of our ally,
[14:48] I would say that being dependent for so many semiconductors on
[14:53] Taiwan is a problem
[14:56] SPEAKER_01: because Taiwan is too close to China.
[14:58] I'm hoping we don't have a war with China,
[15:02] but if there's one thing we learned,
[15:05] In February 2022 in Ukraine,
[15:07] it's at the age of conventional warfare is not over.
[15:11] SPEAKER_01: And so there are certainly justifications.
[15:14] SPEAKER_01: I am not a religious free trader.
[15:18] SPEAKER_01: Actually, I'll say one more thing.
[15:23] SPEAKER_01: Because the exports create jobs or trade creates jobs or whatever,
[15:29] SPEAKER_01: because it's such a strong instinct,
[15:33] SPEAKER_01: Just being a purist and arguing against it is not a thing.
[15:38] SPEAKER_01: When the Biden administration passed the Inflation Reduction Act,
[15:44] SPEAKER_01: which is the Holy Roman Empire,
[15:46] SPEAKER_01: neither Holy nor Roman nor an empire,
[15:48] SPEAKER_01: the Inflation Reduction Act had nothing to do with inflation.
[15:51] SPEAKER_00: Thank you, Joe Manchin.
[15:54] It was based on climate policy,
[15:57] and it was all an industrial policy based climate policy.
[16:01] SPEAKER_01: We were going to – it was all carrots, no sticks.
[16:04] SPEAKER_01: We were going to give people incentives, and it was quite nationalistic.
[16:08] It had a lot of subsidies for domestic industry in there,
[16:13] and you could have –
[16:14] SPEAKER_01: I had friends who said, why are we doing this?
[16:16] SPEAKER_01: It would be cheaper if the import were necessary.
[16:18] SPEAKER_01: And he asked us, look, let's be real.
[16:22] We would not have gotten Joe Manchin to sign on to it if it
[16:25] didn't have a lot of
[16:26] SPEAKER_01: nationalistic subsidies.
[16:27] SPEAKER_01: So if that's the price to pay,
[16:29] SPEAKER_01: I didn't want us to look back 20 years later and say,
[16:32] SPEAKER_01: well,
[16:33] SPEAKER_01: we doomed the planet,
[16:34] SPEAKER_01: but at least we adhere to the rules of the GATT.
[16:36] SPEAKER_01: So realism is fine, but what we're doing
[16:44] SPEAKER_01: Or what, not we, but what Donald Trump is doing is none of those.
[16:49] None of these arguments that you can make for a strategically
[16:55] nationalistic
[16:56] SPEAKER_01: economic policy apply to what we're actually seeing.
[17:00] SPEAKER_00: And he wants to undo the Inflation Reduction Act and the CHIPS Act,
[17:07] SPEAKER_00: which is another...
[17:10] SPEAKER_01: He wants to kill those,
[17:14] SPEAKER_01: and instead he wants us,
[17:16] SPEAKER_01: I guess,
[17:17] SPEAKER_01: to be screwing tiny little screws and also eat fewer bananas,
[17:22] SPEAKER_01: because we've got a tariff on bananas now,
[17:24] SPEAKER_01: which is certainly...
[17:26] SPEAKER_00: Just to tie this part of the conversation up,
[17:33] SPEAKER_00: what is the problem with the argument that,
[17:36] SPEAKER_00: well,
[17:37] SPEAKER_00: country X,
[17:38] SPEAKER_00: you know,
[17:39] SPEAKER_00: why isn't other countries have tariffs?
[17:43] SPEAKER_00: A good argument, Paul.
[17:44] SPEAKER_01: Okay.
[17:45] The classic argument there,
[17:47] and I was a little surprised when I tracked it down.
[17:51] SPEAKER_01: The classic argument is that saying,
[17:54] SPEAKER_01: look,
[17:54] SPEAKER_01: that's like saying that because other countries have rocky coasts,
[17:58] SPEAKER_01: we should mine our own harbors.
[18:00] The fact that other countries are putting obstacles in there
[18:03] doesn't mean that we
[18:04] SPEAKER_01: should deprive ourselves of the benefit of international trade.
[18:07] And what's actually funny is that the person who came up with
[18:10] that analogy was Joan
[18:12] SPEAKER_01: Robinson,
[18:13] who was a disciple of John Maynard and increasingly became a
[18:17] Marxist in her later
[18:19] SPEAKER_01: years,
[18:19] SPEAKER_01: but even she thought that that was a really stupid argument.
[18:23] SPEAKER_01: No, I mean, it's... The only thing you can say is you want to take...
[18:30] SPEAKER_01: If you're a small country, you take the world as it is.
[18:34] The fact that America imposes tariffs is not a good reason for
[18:39] Luxembourg,
[18:40] actually.
[18:41] They don't have independence,
[18:42] but still,
[18:42] it's not a good reason for New Zealand to have tariffs.
[18:47] SPEAKER_01: If you're a big country, then you could use tariffs as a bargaining chip.
[18:52] SPEAKER_01: to try and get other countries to do something.
[18:56] But that assumes that they're doing something wrong and that
[19:00] you want them to stop.
[19:01] SPEAKER_01: And again,
[19:01] SPEAKER_01: the weirdness about the Trump stuff is that for the most part,
[19:04] SPEAKER_01: the rest of the world is not doing anything wrong.
[19:07] This is sometimes an argument that Trump himself makes and
[19:11] defenders of the tariffs make.
[19:13] SPEAKER_00: It's inconsistent, but that is the kind of MAGA.
[19:20] SPEAKER_00: Trump's a negotiating genius,
[19:22] so he's spreading these tariffs all over and forcing countries
[19:25] to come and
[19:26] SPEAKER_00: negotiate these incredible deals with him.
[19:30] SPEAKER_01: Yeah, and the question is, what are they supposed to be...
[19:34] SPEAKER_01: giving him.
[19:34] SPEAKER_01: That was the—if you looked at what,
[19:37] SPEAKER_01: you know,
[19:37] SPEAKER_01: they tried to make a big deal out of the—you know,
[19:42] SPEAKER_01: we have a trade deal with Britain,
[19:47] SPEAKER_01: and it is almost entirely substance-free,
[19:50] SPEAKER_01: and that's not because Trump is a bad negotiator.
[19:52] It's because the British were already giving the United States
[19:57] essentially free
[19:58] SPEAKER_01: access for our goods to Britain.
[20:00] SPEAKER_01: What more were they supposed to do?
[20:02] SPEAKER_01: You know,
[20:03] China has brought its tariffs down from the high levels that
[20:07] they were last week,
[20:08] SPEAKER_01: but those high levels were imposed in response to U.S.
[20:13] SPEAKER_01: tariffs,
[20:14] and China's tariffs are higher now than they were before Trump
[20:17] started doing all of
[20:18] SPEAKER_01: this stuff.
[20:20] One more sort of general question before we get into some of
[20:23] the more details about
[20:24] SPEAKER_00: what Trump has proposed and the on and off tariff policies we've seen.
[20:32] SPEAKER_00: Just in general, are trade deficits bad?
[20:42] see some appeal to the to the anti trade deficit argument but
[20:47] what is the the uh
[20:48] the what is the reality of that of um what's the problem with
[20:54] being obsessed with
[20:54] SPEAKER_01: trade imbalances okay so there's two levels here um one is
[21:01] being obsessed with the fact that we run a trade imbalance with
[21:04] a particular,
[21:04] SPEAKER_01: you know,
[21:05] SPEAKER_01: with a particular country,
[21:07] SPEAKER_01: which is absolutely bonkers.
[21:10] SPEAKER_01: And this is a case where the analogy with individual really works, right?
[21:15] I mean,
[21:15] I run a huge transit with the Bodega around the corner from me
[21:19] here because I buy a lot.
[21:21] SPEAKER_01: As far as I know, they have not subscribed to my sub stack.
[21:25] SPEAKER_01: So there's nothing wrong with that.
[21:31] SPEAKER_01: That's just the way the world is.
[21:34] There's going to be some countries will have particular things
[21:36] that others want,
[21:37] SPEAKER_01: and there's no reason why that should be balanced country by country.
[21:41] Overall,
[21:42] the United States runs an overall trade deficit,
[21:45] and what is that saying?
[21:50] SPEAKER_01: Well, we run an overall trade deficit because ultimately—
[21:54] SPEAKER_01: The balance of payments always balances.
[21:56] What you sell to other countries and what you buy from other
[21:59] countries is sort of –
[22:00] SPEAKER_01: it's just accounting.
[22:01] SPEAKER_01: It has to be equal.
[22:02] SPEAKER_01: And what are we selling to other countries?
[22:04] SPEAKER_01: Well, we're selling them assets.
[22:05] SPEAKER_01: Countries invest in America.
[22:07] SPEAKER_01: People invest in America.
[22:09] A little bit of that is because they want dollar reserves,
[22:12] and that's a whole other story.
[22:13] SPEAKER_01: But mostly it's just the U.S.
[22:14] SPEAKER_01: has, or at least was until recently, a good place to invest.
[22:17] SPEAKER_01: We had a very dynamic technology sector.
[22:21] SPEAKER_01: We've had higher productivity growth than –
[22:24] SPEAKER_01: any other advanced country.
[22:25] SPEAKER_01: We just, you know, we look good and we look safe.
[22:30] SPEAKER_01: And so a lot of people want to put money here.
[22:33] And the counterpart of that has to be that if we're going to
[22:36] sell more assets than
[22:37] SPEAKER_01: we buy from other countries,
[22:39] SPEAKER_01: then we're going to buy more goods than we sell.
[22:43] And that work through the dollar being relatively strong,
[22:46] which makes U.S.
[22:47] SPEAKER_01: manufacturing a bit less competitive, is the problem.
[22:52] SPEAKER_01: Well, it's not a problem in terms of taking away American jobs.
[22:58] SPEAKER_01: We have 4% unemployment, which is historically very low.
[23:02] SPEAKER_01: We do fine in terms of job creation.
[23:05] SPEAKER_01: It's not a problem in terms of us running deep into foreign debt.
[23:12] SPEAKER_01: There's not a hint,
[23:13] SPEAKER_01: or there wasn't,
[23:14] SPEAKER_01: at least until Trump came along and started making the U.S.
[23:16] SPEAKER_01: look like a reliable partner.
[23:19] But we don't have foreign debt levels that are going to turn us
[23:21] into another
[23:23] SPEAKER_01: Argentina or something.
[23:25] So if you try and – a lot of people just say,
[23:29] oh,
[23:29] we have a trade deficit.
[23:30] SPEAKER_01: That must be bad.
[23:31] SPEAKER_01: But you ask, where's the harm?
[23:34] SPEAKER_01: And it's really hard to find.
[23:35] SPEAKER_00: All right.
[23:37] SPEAKER_00: Let's –
[23:40] SPEAKER_00: Let's talk about the history since Liberation Day and sort of what your
[23:47] SPEAKER_00: expectations were,
[23:48] SPEAKER_00: what's turned out to be worse,
[23:52] SPEAKER_00: better.
[23:54] SPEAKER_00: But the day after it,
[23:56] you described the tariffs as aren't just the biggest trade
[24:01] shock in history.
[24:01] SPEAKER_00: They're also a clear violation of US international agreements,
[24:04] SPEAKER_00: including GATT,
[24:05] SPEAKER_00: which we went through.
[24:09] and um in effect trump has set fire to all the stuff we just
[24:14] talked about this
[24:15] SPEAKER_00: history from uh 34 uh onwards um what
[24:21] SPEAKER_00: are the main economic risks of what he's done.
[24:28] And I should point out that some people think that this trade
[24:34] war is somehow
[24:35] SPEAKER_00: dissipated because of the backtracking.
[24:38] SPEAKER_00: So if you want to start by explaining why the backtracking is,
[24:42] SPEAKER_00: in your view,
[24:43] SPEAKER_00: not much of a backtracking,
[24:45] SPEAKER_00: that's fine.
[24:46] SPEAKER_00: But let's go through what he's actually done here and what the risks are.
[24:50] SPEAKER_01: Okay,
[24:51] SPEAKER_01: so on April 2nd,
[24:52] SPEAKER_01: Trump went into the Rose Garden with those big records of tariff rates,
[24:58] SPEAKER_01: which was wild because there were,
[25:00] SPEAKER_01: it was a different tariff rate.
[25:03] And the immediate question a lot of us have was,
[25:06] what is,
[25:08] who put those together?
[25:09] SPEAKER_01: I mean, I have some sense of what the staff people,
[25:17] SPEAKER_01: you know, who he has working for him.
[25:19] And there was really nobody out there to put together well over
[25:24] a hundred separate tariff rates.
[25:27] SPEAKER_01: And this was based on careful consideration.
[25:30] SPEAKER_01: And there were clues right away.
[25:33] SPEAKER_01: The fact that we put a tariff on the,
[25:36] SPEAKER_01: on some islands in the Pacific that are inhabited only by penguins.
[25:39] SPEAKER_01: So the, the, uh,
[25:44] SPEAKER_01: It turned out that they did a formula that basically...
[25:51] tariff depends on how big a trade imbalance we have with any
[25:54] given country,
[25:56] SPEAKER_01: which is,
[25:56] SPEAKER_01: again,
[25:57] SPEAKER_00: because just to pause,
[25:58] SPEAKER_00: because as we just discussed,
[26:00] tariffs were basically at a historic low is the context you
[26:05] just explained.
[26:06] But then all of a sudden we see this giant piece of cardboard
[26:10] with very large numbers on it.
[26:13] SPEAKER_00: Everyone's confused.
[26:15] SPEAKER_00: They don't match the history that you just explained.
[26:18] SPEAKER_00: And so the the
[26:20] SPEAKER_00: We get to the bottom of this, and the formula is what?
[26:25] SPEAKER_00: Well, the formula is the U.S.
[26:28] trade deficit with a country divided by the total amount of
[26:36] trade we do with them
[26:39] SPEAKER_01: multiplied by,
[26:40] SPEAKER_01: I think,
[26:40] SPEAKER_01: multiplied by four,
[26:41] SPEAKER_01: something like that.
[26:42] SPEAKER_01: That number is mostly out of thin air.
[26:50] SPEAKER_01: There was a lot of discussion.
[26:51] SPEAKER_01: Actually,
[26:52] SPEAKER_01: it turns out that if you ask ChatGPT to set up a schedule of tarot,
[26:57] SPEAKER_01: you came out with that answer.
[26:59] ChatGPT probably trained itself on the writings of Peter
[27:05] Navarro,
[27:06] who is Trump's trade czar.
[27:07] SPEAKER_01: So it's really just this guy who's...
[27:11] SPEAKER_01: But it made zero sense economically.
[27:15] SPEAKER_01: And it was also,
[27:15] SPEAKER_01: by the way,
[27:16] SPEAKER_01: as it turned,
[27:16] SPEAKER_01: I mean,
[27:17] SPEAKER_01: I'm going on too much,
[27:18] SPEAKER_01: but it was also immediately,
[27:21] SPEAKER_01: even if you leave the economics aside,
[27:25] who's going to administer a separate tariff rate for every
[27:28] country with 130 or so
[27:31] SPEAKER_01: tariff rates?
[27:32] SPEAKER_01: Customs and Border Patrol doesn't have the staff to do that, right?
[27:37] SPEAKER_01: This is like, it's
[27:40] SPEAKER_01: It's like trying to operate Newark Airport with only one air controller.
[27:45] SPEAKER_01: Nobody would – oh, well.
[27:46] SPEAKER_01: Anyway.
[27:47] SPEAKER_01: Yeah.
[27:48] SPEAKER_01: Yeah.
[27:49] SPEAKER_01: But this was – and it's not the best measure, but okay, good enough.
[27:57] SPEAKER_01: If you looked at the average,
[27:59] SPEAKER_01: taking all these tariffs,
[28:01] SPEAKER_01: weighting them by the amount of trade we do with different countries,
[28:04] SPEAKER_01: it was giving you a tariff rate that was somewhere north of –
[28:08] average,
[28:09] which made it higher than the infamous Smoot-Hawley tariff of
[28:13] 1930.
[28:14] SPEAKER_01: Crazy stuff.
[28:16] SPEAKER_01: Totally unworkable.
[28:19] SPEAKER_01: A week later,
[28:19] SPEAKER_01: it was replaced with a completely different set of tariffs,
[28:25] SPEAKER_01: which a lot of people said,
[28:26] SPEAKER_01: oh,
[28:26] SPEAKER_01: well,
[28:26] SPEAKER_01: this is,
[28:28] SPEAKER_01: you know,
[28:28] SPEAKER_01: they're climbing down.
[28:31] Actually,
[28:32] although the tariffs were lower for many countries,
[28:34] it was mostly 10% on average.
[28:38] SPEAKER_01: but it was 145% on China.
[28:40] SPEAKER_01: And again,
[28:41] SPEAKER_01: if you did the overall,
[28:43] SPEAKER_01: the average tariff rate,
[28:44] SPEAKER_01: it was still higher than smooth-holy,
[28:47] SPEAKER_01: and in some ways,
[28:50] SPEAKER_01: maybe even more disruptive,
[28:52] SPEAKER_01: because 145% tariff-based means complete
[28:57] SPEAKER_01: We stopped China entirely.
[29:00] SPEAKER_01: In fact,
[29:00] SPEAKER_01: literally,
[29:01] ships stopped leaving Shanghai for the port of Los Angeles in
[29:06] the face of that one.
[29:09] SPEAKER_01: They're starting again, but it's going to take a while.
[29:12] SPEAKER_01: So we're probably going to have some empty shells in a few weeks.
[29:16] And the thing that really gets me about that is we know
[29:20] something different.
[29:21] SPEAKER_01: Thanks to,
[29:22] SPEAKER_01: you know,
[29:26] SPEAKER_01: reporters who do at least get some of the inside scoop,
[29:28] SPEAKER_01: we know how it happened.
[29:30] SPEAKER_01: We know that Scott Besant,
[29:32] SPEAKER_01: the Treasury Secretary,
[29:33] SPEAKER_01: and Howard Lutnick,
[29:34] SPEAKER_01: the Commerce Secretary,
[29:36] SPEAKER_01: went into Trump's office at a time when they knew that Peter Navarro,
[29:41] SPEAKER_01: the trade czar,
[29:41] SPEAKER_01: was in another meeting,
[29:42] taught Trump this completely different tariff schedule in his
[29:47] office until he had
[29:48] SPEAKER_01: posted it on Truth Social.
[29:50] SPEAKER_01: So this is policymaking in the world's greatest nation.
[29:54] SPEAKER_01: And now we have another.
[29:59] SPEAKER_01: So we waited a month before the next major tariff change,
[30:05] SPEAKER_01: which is basically cutting the tariff on Chinese imports from 145 to 30,
[30:10] SPEAKER_01: which sounds like a lot,
[30:11] SPEAKER_01: except...
[30:17] SPEAKER_01: 145 is ridiculous.
[30:17] 145,
[30:18] most of that is there because it's well beyond the amount that
[30:23] just cuts off trade.
[30:25] SPEAKER_01: And 30 doesn't cut off all trade, but my very...
[30:33] SPEAKER_01: Not back to the envelope,
[30:35] because I actually tried digging through the literature for
[30:38] elasticity estimates
[30:40] SPEAKER_01: and so on.
[30:40] SPEAKER_01: But still,
[30:42] SPEAKER_01: roughly speaking,
[30:42] I think we now have a tariff that doesn't completely cut off
[30:45] trade with China.
[30:46] SPEAKER_01: It only cuts off two-thirds of it.
[30:48] SPEAKER_01: So this is extremely extreme policy.
[30:51] And overall,
[30:53] we still have tariffs in place that will probably reduce U.S.
[30:57] SPEAKER_01: trade by about 50%.
[31:00] SPEAKER_01: Say that again, by how much?
[31:02] SPEAKER_01: 50%.
[31:02] SPEAKER_01: Roughly half.
[31:03] SPEAKER_01: We're going to cut the overall U.S.
[31:04] trade roughly in half once these things have had time to work
[31:07] their way through the system.
[31:10] SPEAKER_00: So the revised tariff, cutting U.S.
[31:12] trade with the world in general by a half,
[31:15] and reducing trade with China by two-thirds.
[31:18] SPEAKER_00: Yeah, we had an average tariff.
[31:21] SPEAKER_01: before this stuff of around 10%.
[31:23] SPEAKER_01: We were very close to pre-trade.
[31:26] SPEAKER_01: We now have an average tariff for now.
[31:29] SPEAKER_01: All of this stuff is provisional,
[31:30] SPEAKER_01: but for the next 90 days,
[31:31] SPEAKER_01: supposedly,
[31:32] SPEAKER_01: we have an average tariff of 17.8%.
[31:37] SPEAKER_01: So that's a huge leap.
[31:39] And you want to think that means that we've added 15% to the
[31:43] consumer price on
[31:45] SPEAKER_01: average of everything we import from abroad.
[31:47] SPEAKER_01: And lots of people will refuse to pay those prices.
[31:52] SPEAKER_01: I don't know exactly what they'll buy,
[31:55] SPEAKER_01: but it really is tremendously,
[31:58] SPEAKER_01: to use the technical term,
[31:59] SPEAKER_01: discombobulating the whole way we've been conducting business.
[32:04] SPEAKER_00: You described this recently as completely insane to merely crazy.
[32:09] SPEAKER_00: Yeah.
[32:11] Just to back up a little bit,
[32:13] what did you make of the Chinese response so far?
[32:18] SPEAKER_00: Are they playing Trump?
[32:20] SPEAKER_00: Are they playing a more sophisticated game?
[32:21] SPEAKER_00: Has he just confused them?
[32:25] SPEAKER_00: Are they not as sophisticated in these negotiations as one might think?
[32:30] SPEAKER_00: What's your analysis of how they've played it?
[32:33] SPEAKER_01: No, I think the Chinese are, they're playing hard as well.
[32:37] SPEAKER_01: They impose,
[32:38] SPEAKER_01: you know,
[32:38] SPEAKER_01: counter tariffs almost as high as ours,
[32:40] SPEAKER_01: but more important,
[32:43] SPEAKER_01: if you get into a real full-on knockdown situation,
[32:50] only one person comes out conscious,
[32:54] trade war,
[32:55] tariffs are not the end of the story.
[32:58] In the end,
[32:59] the reason you trade is not in order to be able to export
[33:02] stuff.
[33:02] SPEAKER_01: You export stuff really in order to be
[33:06] SPEAKER_01: pay for imported stuff.
[33:08] SPEAKER_01: And so if you're really serious,
[33:10] SPEAKER_01: if you really are saying,
[33:11] SPEAKER_01: okay,
[33:11] SPEAKER_01: this is an economic war,
[33:13] what you start doing is trying to cut off the supply of things
[33:16] that the other guy
[33:17] SPEAKER_01: needs.
[33:18] So it's actually export cars that are the,
[33:22] we pulled out a knife,
[33:23] they pulled out a gun.
[33:24] SPEAKER_01: Yeah.
[33:26] Cutting off rare earths,
[33:27] which are these,
[33:28] you know,
[33:28] weird,
[33:29] weird,
[33:29] weird,
[33:31] critical to a lot of,
[33:33] SPEAKER_01: high technology, batteries.
[33:35] SPEAKER_01: There's some kinds of batteries only China can produce.
[33:38] SPEAKER_01: There's a bunch of other,
[33:39] SPEAKER_01: you know,
[33:40] we've allowed ourselves to become pretty dependent on China for
[33:43] some crucial
[33:44] SPEAKER_01: industrial inputs.
[33:45] SPEAKER_01: And that, by the way, is a mistake.
[33:46] We should have had an industrial policy to make sure that we
[33:48] had adequate capacity
[33:50] SPEAKER_01: and we should be building that now.
[33:52] SPEAKER_01: But in any case, the Chinese have pulled out
[33:54] SPEAKER_01: those weapons,
[33:56] SPEAKER_01: and of course the United States,
[33:59] SPEAKER_01: well,
[34:00] SPEAKER_01: I don't know,
[34:00] SPEAKER_01: I have no idea what Trump and the people around him understand.
[34:04] SPEAKER_01: I suspect that Bessent,
[34:08] SPEAKER_01: who's not a complete idiot,
[34:09] SPEAKER_01: understands kind of what's at stake,
[34:10] SPEAKER_01: but I'm not sure that anyone else does.
[34:13] SPEAKER_01: The United States climbed down,
[34:16] SPEAKER_01: although still to a point that's quite destructive,
[34:19] SPEAKER_01: and if it really comes down to a conflict,
[34:21] SPEAKER_01: I think
[34:24] SPEAKER_01: Somebody,
[34:25] I steal lines from people all the time without meaning to
[34:28] because they're just out
[34:29] SPEAKER_01: there.
[34:30] SPEAKER_01: But somebody comes down to a full-on conflict.
[34:33] It's a lot easier for the Chinese to provide physical stimulus
[34:38] to replace lost jobs
[34:39] in expert industries than it is for the United States to stand
[34:43] up a manufacturing
[34:43] SPEAKER_01: base that it doesn't have.
[34:47] Fundamentally,
[34:48] we're in the weaker position,
[34:50] and the Chinese understand that.
[34:54] SPEAKER_00: Let's talk about the risks now.
[34:56] SPEAKER_00: So your view is that despite this climb down, the trade war isn't over.
[35:03] SPEAKER_00: Let's start with just the general economic risks.
[35:07] SPEAKER_00: What do you think, what are you worried about as things stand now?
[35:12] SPEAKER_00: Okay.
[35:14] So I keep on saying there are two things,
[35:15] but everything here seems to be at least double-edged.
[35:20] SPEAKER_01: The first is, look, we're still looking at something that's going to
[35:25] SPEAKER_01: probably add two points to inflation over the next year.
[35:27] SPEAKER_01: And very uneven.
[35:32] SPEAKER_01: Who buys the kinds of things that are now subject to tariffs?
[35:36] SPEAKER_01: Particularly hard hit are things like clothing, sort of big necessities.
[35:43] SPEAKER_01: So it's really a really nasty shock to the cost of living for people with
[35:47] SPEAKER_01: relatively low earnings.
[35:49] SPEAKER_01: So if you if you if you if you
[35:54] SPEAKER_01: If you eat out at fancy restaurants,
[35:56] SPEAKER_01: most of the price of your meal is actually domestic value added.
[36:00] SPEAKER_01: It's you know, it's it's it's the weeks books.
[36:04] SPEAKER_01: You can't afford to eat out and buy groceries.
[36:07] SPEAKER_01: Well, you're out of luck.
[36:08] SPEAKER_01: You're you're really being hit directly by these tariffs.
[36:11] SPEAKER_01: So best estimates we have said that we really are talking about three,
[36:16] SPEAKER_01: four percent rise in the cost of living for people like.
[36:22] SPEAKER_01: Income distribution.
[36:24] SPEAKER_01: So that's nasty.
[36:26] SPEAKER_01: That's a serious inflation impact.
[36:29] SPEAKER_01: And then there's something that is new to all of us.
[36:32] SPEAKER_01: Normally,
[36:34] SPEAKER_01: you know,
[36:35] economists have a lot of bad stuff to say about tariffs and
[36:37] protectionism,
[36:38] SPEAKER_01: but normally we don't say it causes recessions.
[36:41] SPEAKER_01: You have a trade war.
[36:42] SPEAKER_01: Yeah,
[36:42] SPEAKER_01: you lose jobs in export industries,
[36:44] SPEAKER_01: but you gain jobs in industry competing with imports,
[36:48] SPEAKER_01: and it's kind of a wash.
[36:50] SPEAKER_01: But what's happening now is that
[36:53] SPEAKER_01: the uncertainty.
[36:56] If you were a business involved that either relies on stuff
[37:01] from abroad or exports
[37:03] SPEAKER_01: or whatever,
[37:05] and you have to make a decision on an investment that really
[37:09] won't mature until
[37:10] SPEAKER_01: late this year or maybe next year or the year after,
[37:13] SPEAKER_01: you have to make
[37:15] SPEAKER_01: I guess, about what is the U.S.
[37:17] SPEAKER_01: trade policy going to be?
[37:19] An investment that makes sense if we end up basically going
[37:24] back to the free trade
[37:26] SPEAKER_01: agreement with the U.S.,
[37:28] SPEAKER_01: Mexico,
[37:28] and Canada will be a complete loss if we end up with high
[37:34] tariffs on everything
[37:35] SPEAKER_01: produced there,
[37:36] SPEAKER_01: even something China.
[37:38] If you're in the retail industry,
[37:41] do you think that we're going to go back to something like
[37:45] and 15% tariffs on Chinese imports,
[37:47] in which case,
[37:48] okay,
[37:48] you can handle that.
[37:50] SPEAKER_01: Or when 90 days are up, it's back to 145%.
[37:52] SPEAKER_01: You have no idea,
[37:54] and any decision you make runs like a 50-50 chance of being a
[37:59] total waste of money.
[38:00] And you can also see that business investment is drying up
[38:05] because who can invest
[38:08] SPEAKER_01: in an environment where nobody knows what the ground rules are?
[38:11] SPEAKER_01: So that is...
[38:13] SPEAKER_01: A big drag.
[38:15] SPEAKER_01: The reason we're talking about stag,
[38:17] SPEAKER_01: we talk about the inflation comes from the direct impact of the tariffs,
[38:21] and the stag comes from the fact that nobody dares to make
[38:25] commitments because you
[38:26] SPEAKER_01: don't know what the policy is going to be.
[38:29] And every story we hear about the policy process in the
[38:33] administration is what policy process?
[38:36] SPEAKER_01: It's whoever got into the Oval Office law.
[38:40] SPEAKER_00: Yeah.
[38:40] SPEAKER_00: If you can't,
[38:41] if you're not able to successfully lock Peter Navarro out of
[38:44] the meeting next time,
[38:46] SPEAKER_00: you know,
[38:47] SPEAKER_00: who knows what will come out of that black box?
[38:50] SPEAKER_00: Yeah.
[38:50] SPEAKER_01: And actually, who knows?
[38:54] SPEAKER_01: Will trade policy may be determined by who buys most Trump meme coins?
[39:01] SPEAKER_01: I mean, this is just like a world before.
[39:04] SPEAKER_01: Yeah.
[39:05] SPEAKER_00: Yeah,
[39:06] SPEAKER_00: and well,
[39:07] and then the whole other issue of what the courts will say
[39:10] about this at the end of
[39:13] SPEAKER_00: the day.
[39:14] SPEAKER_01: That's an interesting question because we designed – I mean trade policy,
[39:20] SPEAKER_01: like I said,
[39:20] SPEAKER_01: trade policy until like now was an admirable –
[39:26] SPEAKER_01: example of public policy.
[39:28] SPEAKER_01: We set up a system that was rules-based,
[39:31] SPEAKER_01: but has safety valves,
[39:34] SPEAKER_01: escape valves,
[39:35] pressures too great that allow the president temporary tariffs
[39:41] when there's a real
[39:42] SPEAKER_01: emergency and look,
[39:43] SPEAKER_01: the political pressure would just be too great.
[39:47] SPEAKER_01: Well, one, two, three,
[39:49] SPEAKER_01: 301, all these these jargony things.
[39:51] But there are and they all take place through a kind of quasi
[39:54] judicial process.
[39:55] SPEAKER_01: The Commerce Department,
[39:58] National Trade Administration or some other or some things are
[40:02] supposed to have do
[40:04] SPEAKER_01: investigations,
[40:05] SPEAKER_01: hold hearings.
[40:06] SPEAKER_01: Now, they all work for the president.
[40:08] SPEAKER_01: They're all part of the executive branch.
[40:09] SPEAKER_01: But in the past, they all really tried to do their job.
[40:14] SPEAKER_01: But that's not the political system we have now.
[40:17] SPEAKER_01: That's a system where whatever the president says is right.
[40:20] SPEAKER_01: So he has carte blanche,
[40:22] and a lot of what he's doing is that he's declaring that
[40:24] there's an economic
[40:25] SPEAKER_01: emergency,
[40:26] SPEAKER_01: and he has to do all of this.
[40:27] SPEAKER_01: And there clearly isn't.
[40:29] SPEAKER_01: And again,
[40:30] SPEAKER_01: if we were in a different world,
[40:31] SPEAKER_01: the Supreme Court would say,
[40:33] SPEAKER_01: hey,
[40:33] SPEAKER_01: this is an abuse of the law.
[40:34] SPEAKER_01: You do not have the power because there is no emergency.
[40:38] SPEAKER_01: Does anyone really expect this court to do that?
[40:40] SPEAKER_01: I don't.
[40:42] SPEAKER_00: No, I don't think so.
[40:44] Another conversation this week that's all about emergency
[40:48] powers with an expert on that issue.
[40:52] SPEAKER_00: So people who want to know more about that, please check that out.
[40:54] SPEAKER_00: I'll post it soon.
[40:55] But the bottom line is I don't think we talk enough about the
[40:59] fact that Trump
[41:01] SPEAKER_00: doesn't even have,
[41:03] SPEAKER_00: based on a very clear reading of the law,
[41:06] SPEAKER_00: the authority to institute these tariffs.
[41:10] SPEAKER_00: And so much of the coverage mentions that in the 20th paragraph.
[41:15] SPEAKER_01: Yeah, I mean, there's a Section 232 says it's national security.
[41:21] SPEAKER_01: And the president can impose Section 232 tariffs if the relevant,
[41:28] SPEAKER_01: and I've forgotten which,
[41:29] but the relevant committee concludes that there is a real
[41:35] threat to national
[41:35] SPEAKER_01: security.
[41:36] SPEAKER_01: But he's used Section 232 tariffs to limit imports of...
[41:46] SPEAKER_01: Okay, somebody is just having trouble hearing.
[41:47] SPEAKER_01: I hope this is okay.
[41:50] SPEAKER_01: But even in the first administration,
[41:55] we were cutting off imports of aluminum from Canada on the
[42:02] grounds of national
[42:03] SPEAKER_01: security.
[42:04] SPEAKER_01: And what?
[42:05] SPEAKER_01: I mean, the evil Canadian imperialists are going to try and blackmail us?
[42:16] SPEAKER_01: Are you there?
[42:16] SPEAKER_01: Okay, anyone, I hope people are hearing me.
[42:25] SPEAKER_01: I've just lost Ryan.
[42:30] SPEAKER_01: I don't think it's me.
[42:34] SPEAKER_01: Help?
[42:40] SPEAKER_01: Probably...
[42:44] SPEAKER_01: I'm not hearing Ryan or seeing him.
[42:49] SPEAKER_01: I blame Elon Musk.
[42:51] SPEAKER_01: I'm sure that somehow rather doged at this.
[42:53] SPEAKER_01: But anyway.
[42:59] SPEAKER_01: Well, hi, folks.
[43:00] SPEAKER_01: Looks like for the moment, I've got a solo Substack live.
[43:06] SPEAKER_01: And
[43:11] SPEAKER_00: Okay, hang on.
[43:13] SPEAKER_00: Someone's trying to call me.

Shows are listed from Apple Podcasts' charts and directory, and Podcast Index where it is used. Every show and episode belongs to its publisher and plays from the publisher's own feed; this site hosts none of them.